Robert was having lunch with his certified financial planner when he mentioned his IRAs. He told his planner that he had enough income and that he didn’t need to take any money from them, so he planned to leave his IRAs and 401(k) alone. The only problem, his advisor told him, was that because he had turned 70½ back in March, by law he was going to have to draw out a certain amount of that money by the end of the year. Robert was surprised and a little frustrated. “Why do I have to take any money out of it?” he asked, totally chagrined. That’s when his financial planner told him something no one had ever told him before: “Once you turn that magic, arbitrary age of 70½, the government has ruled that you must start taking distributions from all qualified accounts like 401(k)s and IRAs.” Robert responded, “Well, what if I don’t take any out?” “If you don’t, you’re not going to like what happens next,” the advisor said. The tax penalty for not taking your so-called “required minimum distribution” is fully half of the RMD amount, plus the regular income taxes on the full amount! That means if Robert had $500,000 in qualified plans that are under the RMD rules, his first distribution had to be at least $20,243. If he decided not to take it – or even just forget to – the IRS penalty alone would be $10,122. Then Robert would have to pay his regular income tax on the full $20,243. While many of us consider that to be highway robbery, it’s still legal highway robbery. So Robert and his planner got busy going back to figure what Robert had in each account last Dec. 31. That’s the date you must use to figure up how much you have to take out the following year. For Robert, he had to go back and find out what he had in his three different IRAs and what he had in his 401(k) on the last day of the previous year. He next asked if he have to take money from each of his four accounts, or could he take it all from just one? The rules governing IRAs are different than the ones covering 401(k)s. With IRAs, he can add up the total amount he had in all three of them as of Dec. 31, figure the RMD he’d have to take, then take it out of one, two or all three of the accounts, and in any amount he wants. But in the case of 401(k)s, you have to take money from each one individually. So Robert wasn’t allowed to add his 401(k) balance to his IRAs and take his RMD from just one account. He had to figure his 401(k) separately and take his RMD from that account alone. If you think the rules regarding putting money in IRAs and 401(k)s are complicated, wait until you see the rules around taking the distributions. This is where so many people could use the services and knowledge of a certified financial planner. Certified financial planners have individualized training to help their clients through the maze of both amassing and distributing their tax qualified accounts.